We evaluate how the euro area economy would have performed since mid-2021 under alternative monetary policy strategies. We use the ECB's workhorse estimated DSGE model and contrast actual policy conduct against alternative strategies which differ in their "lower-for-longer" commitment as well as...

Could a monetary policy loosening in a low interest rate environment have unintended recessionary effects? Using a non-linear macroeconomic model fitted to the euro area economy, we show that the effectiveness of monetary policy can decline in negative territory until it reaches a turning point,...

This study demonstrates that nonlinearities, coupled with worker heterogeneity, make it possible to reconcile the Diamond–Mortensen–Pissarides model with the labor market dynamics observed in the United States. Nonlinearities, induced by firings and downward real wage rigidities, magnify...